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Thursday, Mar 28, 2024

REAL ESTATE QUARTERLY: Class A Tenants Go West in Search of Lower Lease Rates

-Two Chatsworth industrial buildings sold for $29.8 million to San Francisco-based Prologis, a real estate investment trust. TA Realty of Boston, a privately held real estate investment adviser, was the seller. The warehouses, at 9453 Owensmouth Ave. and 21411 Prairie St., total 225,720 square feet. -The NoHo Commons shopping center sold for $43 million. JH Real Estate Partners Inc. of Newport Beach bought the 65,000-square-foot retail center, at 5300 Lankershim Blvd., from RedRock Noho Retail. -Wilbur Medical Plaza, at 5620 Wilbur Ave. in Tarzana, traded hands in June for $18.8 million, or roughly $356 a square foot. The 52,889-square-foot property was sold by real estate investment firm Ethan Christopher of Encino; the buyer was IRA Realty Capital of Newport Beach. -A 104,244-square-foot office building at 6200 Canoga Ave. in Woodland Hills sold to Maxxam Enterprises of Beverly Hills and L.A.’s Madison Partners for $15.7 million, or $150 a square foot. The seller was Embarcadero Capital Partners of Belmont. -The former 82,660-square-foot North Hollywood headquarters of Bobrick Washroom Equipment Inc. was leased to NBCUniversal for use as set and equipment storage space. Bobrick, founded in 1906, sold its two buildings in the 11600 block of Hart Street in October for $7.6 million to Selective Real Estate Investments of Encino. Earlier this year, Bobrick moved into a build-to-suit, $20 million HQ at nearby 6901 Tujunga Ave. -Technocel, a Simi Valley mobile device accessory distributor, leased 65,550 square feet at 13571 Vaughn St. in San Fernando. The lease follows the company’s expansion into a new 60,000-square-foot headquarters building in Simi Valley in the fall. Falling vacancy rates and strong sales and leasing volume characterized the second quarter in the San Fernando Valley, even as rising rents begin to push tenants out of premier buildings in Encino and Sherman Oaks toward the west. The vacancy rate across the Valley dropped seven-tenths of a percent in the second quarter to 14.5 percent as 137,100 total square feet were absorbed, according to data from Colliers International. The biggest sale of the quarter was the NoHo Commons. The 65,000-square-foot retail center, at 5300 Lankershim Blvd., was acquired by JH Real Estate Partners Inc. of Newport Beach for $43 million, or about $681 a square foot. Illustrating how quickly the market has turned around, seller RedRock Noho Retail, a joint venture of Redwood Partners Inc. of Laguna Beach and Rockwood Capital of San Francisco, realized a $200-a-square-foot gain on the property, which it purchased in 2007 for $30.5 million. On the leasing side, average asking rates continued their slow climb across the Valley during the quarter, reaching $2.18. But in some premium buildings on Ventura Boulevard, asking rates have climbed over $3 a square foot, said Jacob Mumper, an associate at Colliers. “Rental rates have been going up quarter after quarter in Sherman Oaks and Encino, and that’s pushing some long-term tenants to reconsider their leases because they just can’t afford the space anymore,” he said. Meanwhile, the West Valley, a traditionally lagging submarket, was the top performer in the region while the Central and East Valley submarkets basically treaded water during the quarter. With 140,700 feet absorbed, the vacancy rate in the West Valley came in at 15.6 percent, down nearly a full percentage point from 16.5 percent in the first quarter. Jonathan Larsen, principal and managing director at Avison Young, said some of his clients who are being priced out of the Central Valley are looking to lease in Woodland Hills, and he thinks that trend might continue. “With the new Westfield (Village at Topanga) going up, and all the retail being added there, that will help Woodland Hills tremendously,” Larsen said. But while the Central and East Valley submarkets basically stayed flat in the quarter, that didn’t mean deals weren’t getting done. “I have six properties in escrow right now, which is more typical of my totals for an entire year,” said Stacy Vierheilig-Fraser, senior managing director at Charles Dunn Co. “If a property is priced right and doesn’t have inherent problems, it is going to sell pretty quickly.” In the industrial market, Colliers Senior Executive Vice President John DeGrinis said sales and leasing activity is at historic highs and trending higher, threatened only by extraordinarily low vacancy rates across the region. “The West San Fernando Valley is 2 percent vacant, but the Central Valley is 0.1 percent vacant. I’ve never seen vacancy lower in my 30 years in this market,” he said. The lack of availability has driven up industrial asking rents; Central Valley landlords that were asking 55 cents a square foot on average a year ago are now asking for 75 cents, according to Colliers. – Karen E. Klein

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